Currently Nemonix Is Using a Decentralized Collection System Whereby Customers

question 38

Multiple Choice

Currently Nemonix is using a decentralized collection system whereby customers mail their checks to one of the firm's eight regional locations.Its annual sales are $95 million.Checks are deposited each business day in a local bank and the amount of the deposit is sent to the firm's concentration bank in Dallas.The average time between deposit in the local bank and the availability of those funds, in Dallas, to Nemonix is 6 days.Nemonix has determined that the use of wire transfers would reduce the float by four days, but the transfer will cost $7.50.If transfers will be made on the 250 days that banks are open each year, should Nemonix switch to the wire transfer system? Assume that Nemonix can earn 8% on the funds released through this more efficient transfer.

• A)Yes, savings of $106,600
• B)Yes, savings of $61,388
• C)Yes, savings of $68,288
• D)No, loss of $6,671

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Definitions:

Adequacy

Adequacy refers to the suitability of something to meet the needs in its context or the sufficiency in quantity or quality to fulfill a specific requirement.

Consideration

Something of value exchanged between parties within a contract, serving as the reason or motive for entering into the agreement.

Adequacy

The sufficiency to meet the needs or requirements; often assesses whether something is enough in quantity or meets a certain standard.

Consideration

Something of value (such as money, services, or goods) exchanged between parties in a contract.